I like your thinking and i really hope this is one of the options the banks offer.
If the IBRC takes the trackers from AIB, PTSB and EBS, I would be surprised if they did so at a 12% discount.
The banks would be far better off if they converted unprofitable trackers to profitable trackers or SVRs but reduced the balance. They would take the hit up front but they would have an ongoing profitable customer who may later remortgage.
....all you are addressing is the negative equity rather than affordability.
...and addressing negative equity in this manner solves nothing. If someone can afford to trade up in terms of the additional repayments, they should be let take their negative equity onto the new property.
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yes - its very much addressing negative equity. Most people are well able to afford their mortage but cannot move becasue they are in negative equity and if they do move, the tracker goes. thus by moving and trying to either buy a bigger house becasue they can afford it or trying to downsize to make thing more affordable and to allow for a little more cash for everyday spending, they are penalised becasue the tracker does not move.
It would take huge leap by the government, but it really could make a gigantic difference if the simply said that in exchange for moving from trackers to SVR, they will (via the banks) simply deduct 25% off the outstanding balance of anyone with a tracker mortgage and for those who feel left out, first time buyers between 2005 & 2008 get a 10% write off on the outstanding debt with the proviso that any write off is applied to arrears first.
At that stage the market will start moving, it will free up cash, it will make hosues sell again, but most impirtantly of all it would bring HUGE confidence back to people who currently have this around their neck and could kick start the economy and retail arena (that's where my interest is!) very very quickly with little if any downside.
Think of it!
Positives -
People get confidence back.
Housing market become more liquid
Retail spending increases
Vat receipts increase
Jobs increase
Social welfare payments decrease
Paye tax receipts increase
Banks no longer have the track mortgage headache
Negatives
Frankly none beside a few people saying its not fair.
It won't cure all the problems, but even in a good property market there are repossessions and plenty of people who can afford to pay. Hand on heart, something as simple as this could bring everything back on track terribly easily and quickly.
How will it free up cash? If I give up a cheap tracker to go onto a more expensive SVR, chances are that I am paying more every month on my mortgage despite the 25% writedown.
Also not sure how it really helps people who bought at the peak who are in negative equity of 40-50%. Yes they are in less negative equity but they are paying more for the mortgage.
There might be some use of your idea on a case by case basis but it's not the answer for the wider problem.
1. So you want people who aren't in negative equity to help those in negative equity to make them feel better even though they can pay their mortgage. How is that fair?
2. Have you done the maths to reach such a conclusion. The difference between my tracker and an AIB SVR is about 1.5-2%. Even taking TRS into account, I am a couple hundred down every month following your suggestion. How does that help my cash flow even if I feel richer.
Can anyone tell what this would mean for my situation ie:
Majority of mortgage on a tracker,(12 years remaining ) the rest on SVR.
I would propose it applies to every tracker mortgage in the height of the boom years
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